DEFENSE HEALTH 

CARE

Acquisition Process 

for TRICARE’s Third 

Generation of 

Managed Care 

Support Contracts

Report to the Committee on Armed 

Services, U.S. Senate

March 2014

GAO-14-195

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-195, a report to the 

Committee on Armed Services, U.S. Senate

March 2014

DEFENSE HEALTH CARE

Acquisition Process for TRICARE’s Third Generation 

of Managed Care Support Contracts

Why GAO Did This Study

DOD provides certain health care 

services through its TRICARE 

Program, which complements the 

health care services provided in 

military treatment facilities. DOD 

acquires these health care services 

through MCSCs with private sector 

companies. As of October 1, 2013, 

DOD’s Defense Health Agency is 

responsible for awarding, 

administering, and overseeing 

TRICARE’s MCSCs. Prior to this date 

TMA handled these duties. 

DOD’s health care costs have more 

than doubled from $19 billion in fiscal 

year 2001 to its fiscal year 2014 

budget request of more than 

$49 billion. Senate Report 112-173, 

which accompanied a version of the 

National Defense Authorization Act for 

Fiscal Year 2013, cited concerns with 

the growth of DOD’s health care costs 

and identified private sector health 

care contracts as an area for potential 

savings and efficiencies.

The Senate report mandated that GAO 

review DOD’s process for acquiring 

TRICARE’s MCSCs. This report 

examines: (1) TMA’s acquisition 

process to award TRICARE’s third 

generation MCSCs; (2) the extent to 

which issues were raised in the bid 

protests involving these MCSCs, 

including identifying any common 

themes; and (3) lessons learned from 

the acquisition process to award these 

MCSCs and how these lessons may 

be used in future acquisitions. GAO 

reviewed relevant federal statutes, 

regulations, policy documentation, and 

the bid protest decisions for 

TRICARE’s third generation MCSCs. 

GAO also interviewed TRICARE 

officials about the acquisition process 

and lessons learned.

What GAO Found

The TRICARE Management Activity (TMA) within the Department of Defense 

(DOD) used the acquisition process prescribed by federal regulations to acquire 

health care services for the TRICARE Program through the third generation of 

TRICARE’s managed care support contracts (MCSC). This process included a 

three-phased contract award process outlined in the figure below. 

TMA’s Contract Award Process: Phases and Activities in the Acquisition Process

TMA policy also defined steps for the acquisition process beyond what was 

required in the federal regulations, including developing additional documentation 

and obtaining additional approvals from senior TRICARE acquisition officials. For 

example, peer reviews of the acquisition process are conducted and documented 

for certain DOD contracts, including TRICARE’s MCSCs. 

TMA awarded a contract for each TRICARE region (North, South, and West), but 

challenges (bid protests) to the agency’s award decisions were filed by 

unsuccessful offerors in all three regions. Of the six bid protests filed, three were 

sustained and three were denied. Following the resolution of the bid protests, the 

MCSCs in all three regions were awarded to a different offeror than was initially 

awarded the contract. The offerors who filed the bid protests cited various issues, 

most frequently TMA’s evaluation of proposals. For example, four bid protests

challenged TMA’s evaluation of offerors’ proposed network provider discounts, 

which are discounts of provider payment rates negotiated by offerors to reduce 

overall health care costs to the government.

TRICARE acquisition officials said that sustained bid protests and TMA’s 

implementation of corrective actions prompted them to identify lessons learned 

where changes could be made to improve the acquisition process for subsequent 

TRICARE MCSCs. Lessons learned included (1) improvements in 

communication and documentation to increase transparency during the 

evaluation of proposals and (2) increases to the length of the acquisition process 

to allow for more time to evaluate proposals and for the transition from one 

MCSC to another. TRICARE acquisition officials also said that some of these 

lessons have been applied in other contracting activities; however, they could not 

confirm which, if any, of these lessons will be incorporated into the acquisition 

process for the next generation of TRICARE MCSCs, scheduled for 2018. 

GAO requested comments from DOD on the draft report, but none were 

provided. 

View GAO-14-195. For more information, 

contact Debra A. Draper at (202) 512-7114 or 

draperd@gao.gov.
Page i GAO-14-195 TRICARE Managed Care Support Contracts

Letter 1 

Background 5

Federal Regulations and TMA Policy Defined the Acquisition 

Process for TRICARE’s Third Generation MCSCs 7

Bid Protests of Third Generation MCSC Awards Were Filed in All 

TRICARE Regions; Proposal Evaluation Was a Common 

Theme 14

TRICARE Acquisition Officials Identified and Applied Some 

Lessons Learned from the Third Generation MCSC Acquisition 17

Agency Comments 21

Appendix I Description of Bid Protests of TRICARE’s Third Generation 

Managed Care Support Contract Awards 23

Appendix II GAO Contact and Staff Acknowledgments 33

Table

Table 1: Frequency and Types of Issues Raised in TRICARE’s 

Managed Care Support Contracts Bid Protests, by Region 17

Figures

Figure 1: TMA’s Contract Award Process: Phases and Activities in 

the Acquisition Process 8

Figure 2: Source Selection Team Roles and Responsibilities for 

TRICARE’s Contract Award Process 11

Figure 3: Timeline of Bid Protest Events for TRICARE’s North 

Region Third Generation Managed Care Support 

Contract 24

Figure 4: Timeline of Bid Protest Events for TRICARE’s South 

Region Third Generation Managed Care Support 

Contract 27

Figure 5: Timeline of Events for TRICARE’s West Region Third 

Generation Managed Care Support Contract 30

Contents
Page ii GAO-14-195 TRICARE Managed Care Support Contracts

Abbreviations

DFARS Defense Federal Acquisition Regulation Supplement

DHA Defense Health Agency

DOD Department of Defense

FAR Federal Acquisition Regulation

MCSC managed care support contracts

RFP request for proposals

TMA TRICARE Management Activity

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Page 1 GAO-14-195 TRICARE Managed Care Support Contracts

441 G St. N.W.

Washington, DC 20548

March 7, 2014

The Honorable Carl Levin

Chairman

The Honorable James M. Inhofe

Ranking Member

Committee on Armed Services

United States Senate

In fiscal year 2012, the Department of Defense (DOD) provided health 

care to nearly 9.7 million servicemembers, retirees, and their families 

through its TRICARE Program.1 DOD uses private sector contractors to 

develop and maintain the health care provider networks that make up 

TRICARE’s purchased care system, which complements the health care 

provided by the U.S. military’s health care system—a direct care system 

of military treatment facilities. TRICARE is a regionally structured program 

that provides health care services and support to beneficiaries in three 

U.S. regions: North, South, and West.2 As of October 1, 2013, DOD’s 

Defense Health Agency (DHA) is responsible for awarding, administering, 

and overseeing TRICARE’s managed care support contracts (MCSC). 

Prior to October 1, 2013, the TRICARE Management Activity (TMA) 

handled these responsibilities.3

 

1

TRICARE includes a health maintenance organization option called TRICARE Prime, a 

preferred-provider organization option called TRICARE Extra, and a fee-for-service option 

called TRICARE Standard. A separate benefit, TRICARE for Life, supplements Medicare 

coverage for eligible beneficiaries.

Under TRICARE’s MCSCs, three private 

sector contractors provide certain health care services for TRICARE 

2

The TRICARE Program also provides health care services in overseas regions called 

“areas” in Eurasia-Africa, Latin America and Canada, and the Pacific. For the purposes of 

this report, we focused on TRICARE managed care support contracts in the U.S. regions.

3

Beginning on October 1, 2013, responsibilities for the TRICARE Program, including 

awarding, administering, and overseeing TRICARE MCSCs, were transitioned from TMA 

to the DHA. In this report, we discuss the acquisition process conducted prior to October 

2013 by TMA and will refer to this agency throughout the document. DOD officials we 

interviewed regarding the TRICARE MCSCs are referred to as TRICARE acquisition 

officials in this report. For additional information about the establishment of DHA, see 

GAO, Defense Health Care Reform: Additional Implementation Details Would Increase 

Transparency of DOD’s Plans and Enhance Accountability, GAO-14-49 (Washington, 

D.C.: November 2013).
 

Page 2 GAO-14-195 TRICARE Managed Care Support Contracts

beneficiaries, such as specialty care referrals, enrollment, medical 

management, claims processing, customer service, and data collection.4

DOD’s health care costs have more than doubled from $19 billion in fiscal 

year 2001 to its fiscal year 2014 budget request of $49.4 billion.5 The 

Congressional Budget Office reported that DOD’s health care costs are 

projected to reach $59 billion by 2016 and nearly $92 billion by 2030.6 An 

advisory committee to the Secretary of Defense reported that rising health 

costs result from a number of factors that impact DOD, such as increased 

utilization of services.7 Additionally, the cost of health care programs—

including those supported by purchased care contracts—is taking up 

more of DOD’s budget and may eventually compete with critical defense 

acquisition and operational programs, according to a report by a DOD 

advisory board.8

As of fiscal year 2012, the third generation of TRICARE’s MCSCs 

comprised DOD’s largest purchased care contracts.9

 

4

DOD awarded one managed care support contract for the TRICARE Program in each of 

the three U.S. regions.

The costs of these 

three contracts were expected to total approximately $53 billion over a 

5-year performance period ending in 2015. However, according to a 

senior TRICARE acquisition official, the final costs of these contracts 

could increase if DOD decides to add option years to the performance 

periods of the MCSCs to align their end dates with the revised schedule 

for initiating performance under TRICARE’s fourth generation MCSCs, 

5

DOD’s fiscal year budget request of $49.4 billion includes funds for its Defense Health 

Program, military medical personnel, military construction, as well as funds set aside for 

the Medicare-Eligible Retiree Health Care Fund. The total does not include overseas 

contingency operations funds and certain transfers.

6

Congressional Budget Office, Long-Term Implications of the 2012 Future Years Defense 

Program, Pub. No. 4281 (June 2011).

7

Other factors include increasingly expensive technology and pharmaceuticals, growing 

numbers of users, and the aging of the retiree population. See Defense Health Board, 

Task Force on the Future of Military Health Care (December 2007).

8

Defense Business Board, Focusing a Transition (January 2009).

9

TRICARE’s first generation MCSCs were awarded in 1996 and 1997. The second 

generation MCSCs were awarded in 2003.
 

Page 3 GAO-14-195 TRICARE Managed Care Support Contracts

originally planned for 2015, but now delayed until 2018.10 This delay 

stems from the fact that several bid protests were filed by unsuccessful 

offerors challenging the award decisions in connection with the third 

generation MCSCs, which had been set to begin on April 1, 2010.11

Senate Report 112-173, which accompanied the Senate Committee on 

Armed Services’ version of the National Defense Authorization Act for 

Fiscal Year 2013, mandated that GAO conduct a comprehensive review 

of DOD’s health care contracts and acquisition process.

The 

agency suspended performance during the resolution of the various 

protests, some of which were sustained and resulted in TMA taking 

corrective actions.

12

 

10According to a TRICARE program official, the performance periods for the MCSCs are 

expected to end in 2015 in the North region, in 2017 in the South region, and in 2018 in 

the West region.

The report 

raised concerns regarding the growth in DOD’s health care costs and 

identified health care contracts with private sector companies under its 

TRICARE Program as an area for potential savings and efficiencies. GAO 

was directed to review DOD’s process for awarding TRICARE contracts, 

including the MCSCs, and the degree to which this process is 

transparent. GAO was also asked to assess DOD’s planning activities for 

TRICARE’s fourth generation MCSCs and make recommendations for 

any improvements that could be incorporated in the acquisition process. 

However, as of December 2013, the acquisition process for TRICARE’s 

fourth generation MCSCs had just been initiated, according to a 

TRICARE program official. Therefore, this review focuses on the 

acquisition process for TRICARE’s third generation MCSCs and identifies 

potential impacts on the planning and acquisition activities of future 

MCSCs. In this report we examine: (1) TMA’s acquisition process to 

award TRICARE’s third generation MCSCs; (2) the extent to which issues 

were raised in the bid protests involving TRICARE’s third generation 

11An offeror is a competitor for a government contract. An offeror that was not awarded a 

contract may challenge a federal agency’s award or proposed award of a contract based 

on an alleged violation of statute or regulation. Such a challenge, known as a post-award 

bid protest, may be filed with the contracting agency (referred to as an agency-level 

protest), the U.S. Court of Federal Claims, or GAO. GAO’s bid protest function—in 

contrast to its audit function—is an adjudicative process that is carried out by attorneys in 

GAO’s Procurement Law group, who prepare bid protest decisions resolving disputes 

concerning the awards of federal contracts.

12S. Rep. No. 112-173, at 131-132.
 

Page 4 GAO-14-195 TRICARE Managed Care Support Contracts

MCSCs, including the identification of any common themes; and 

(3) lessons learned, if any, from the acquisition of TRICARE’s third 

generation MCSCs and how, if at all, DHA plans to use these lessons in 

future contracting activities.

To describe TMA’s acquisition process for awarding TRICARE’s third 

generation MCSCs, we reviewed relevant statutes and federal 

regulations, including the Federal Acquisition Regulation (FAR)13 and 

Defense Federal Acquisition Regulation Supplement (DFARS).14

To describe the issues that were raised in bid protests involving 

TRICARE’s third generation MCSCs, we obtained and reviewed the 

various post-award bid protest decisions. We analyzed these decisions to 

identify the issues raised and whether there were any common themes 

across the individual bid protests.

We also 

obtained and reviewed DOD and TRICARE policy documents as well as 

contract documentation specific to TRICARE’s third generation MCSC 

acquisition process. In addition, we interviewed TRICARE acquisition 

officials about the process used to acquire services through these 

MCSCs. Our analysis focused on TMA’s acquisition process and not the 

actual evaluation of proposals, which was the subject of various postaward bid protest decisions related to TRICARE’s third generation 

MCSCs.

To describe the lessons learned from the acquisition of TRICARE’s third 

generation MCSCs and how, if at all, DHA plans to use these lessons in 

future contracting activities, we obtained documentation that identified 

opportunities for improvements in the acquisition process. We also 

conducted interviews with TRICARE acquisition officials to identify what 

lessons, if any, were learned from the acquisition process and how this 

information was used or may be used in subsequent contracting activities. 

To gain additional insights, we reviewed previous GAO work related to 

 

13The FAR defines uniform policies for the acquisition of supplies and services across the 

federal government. The FAR is codified in title 48 of the Code of Federal Regulations.

14The DFARS defines uniform policies for the acquisition of supplies and services for DOD 

that supplement the FAR, and delegates authorities for deviations from the FAR 

requirements. In general, agencies may grant deviations from the FAR when necessary to 

meet the specific needs and requirements of each agency, unless precluded by law, 

executive order, or regulation. See FAR § 1.402.
 

Page 5 GAO-14-195 TRICARE Managed Care Support Contracts

the acquisition process and the implementation of TRICARE’s first and 

second generation MCSCs.

We conducted this performance audit from February 2013 to March 2014 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives.

In 1995, DOD’s TMA introduced TRICARE’s purchased care system. 

Since then, TMA has implemented three generations of contracts to 

support that system. The first generation of TRICARE contracts included 

seven MCSCs that covered 11 geographic health care regions 

nationwide. In 2001, GAO testified about the acquisition process for 

TRICARE’s first generation of MCSCs, reporting that TMA’s approach to 

the acquisition process for these contracts resulted in administrative 

challenges and contributed to funding shortfalls.15

TMA retained the three regions for the third generation of TRICARE 

MCSCs. In 2008, TMA issued a request for proposals (RFP) and six 

offerors submitted seven proposals—two proposals in the North region, 

three in the South region, and two in the West region. One offeror 

submitted a proposal in both the South and West regions. The RFP 

provided that an offeror could not receive an award for more than one of 

the three U.S. regions. Therefore, TMA awarded one regional contract to 

three different offerors. TMA initially awarded a contract to Aetna 

In 2002, TMA made 

changes to its second generation of TRICARE MCSCs, consolidating the 

number of regions from 11 to 3, and reducing the number of MCSCs from 

seven to three. TMA also changed the management and oversight of 

TRICARE’s purchased care and direct care systems through the 

development of a governance plan. The plan established a new, regional 

governance structure, including the creation of TRICARE regional offices 

to manage the three newly established U.S. regions: North, South, and 

West.

 

15GAO, Defense Health Care: Lessons Learned From TRICARE Contracts and 

Implications for the Future, GAO-01-742T (Washington, D.C.: May 17, 2001).

Background
 

Page 6 GAO-14-195 TRICARE Managed Care Support Contracts

Government Health Plan (Aetna) in the North region, UnitedHealth 

Military & Veterans Services (UnitedHealth) in the South region, and 

TriWest Healthcare Alliance Corporation (TriWest) in the West region. 

Each award decision was protested; protests were filed with GAO in the 

North and South regions, and an agency-level protest was filed in the 

West region.16 As a result of sustained decisions in all three regions, TMA 

implemented corrective actions to address the recommendations in the 

post-award bid protest decisions and announced different awards in all 

three regions. Specifically, Health Net Federal Services (Health Net), the 

incumbent contractor, was awarded the North region MCSC; Humana 

Military Healthcare Services (Humana), also an incumbent contractor, 

received the South region MCSC; and UnitedHealth, a non-incumbent 

contractor, received the West region MCSC.17

 

16Health Net Federal Services, LLC, B-401652, Oct. 13, 2009, 2009 CPD 213 (GAO 

protest of the award to Aetna in the North region denied); Humana Military Healthcare 

Services, B-401652.2 et al., Oct. 28, 2009, 2009 CPD 219 (GAO protest of the award to 

UnitedHealth Military & Veterans Services in the South region sustained); Health Net 

Federal Services, LLC, B-401652.3, B-401652.5, Nov. 4, 2009, 2009 CPD 220 (GAO 

protest of the award to Aetna in the North region sustained); UnitedHealth Military & 

Veterans Services, April 6, 2011 (agency-level protest of the award to TriWest in the West 

region sustained). DOD does not publish agency-level protest decisions; however, GAO 

obtained a copy of the UnitedHealth Military & Veterans Services decision for purposes of 

our review.

The award decisions in the 

17Each contract consisted of a base period that included a transition-in period of 

approximately 10 months plus five 1-year option periods and a transition-out period. The 

transition-in period may vary based on the time necessary to conduct the subsequent 

acquisition and if incumbents succeed themselves. According to 10 U.S.C. § 1095c(b), 

DOD is generally required to allow non-incumbents a 9 to12 month transition-in period. A 

10-month transition-in period is considered by the industry as the minimum time 

necessary for non-incumbents to transition-in. If the incumbent is not awarded the new 

contract, the transition-out period for TRICARE’s MCSCs is timed to run concurrently with 

the transition-in period.
 

Page 7 GAO-14-195 TRICARE Managed Care Support Contracts

South and West region were protested, but withstood these challenges 

when the protests were denied.18

Federal regulations—the FAR and DFARS—largely defined the 

acquisition process TMA used to obtain health care services through 

TRICARE’s third generation MCSCs. This acquisition process included 

steps necessary to plan for, develop, and award these contracts. TMA 

policy provided further guidance on the acquisition planning and process 

steps beyond what was required in the federal regulations. This included 

developing additional documentation and obtaining additional approvals 

from senior acquisition officials within TMA, as well as conducting peer 

reviews of the acquisition process.19

TMA’s acquisition staff conducted a three-phased approach to the 

contract award process—(1) planning the acquisition, (2) issuing the RFP 

and soliciting responses, and (3) awarding the contracts—for TRICARE’s 

third generation MCSCs.20

 

18TriWest Healthcare Alliance Corporation, B-401652.12, B-401652.13, July 2, 2012, 2012 

CPD 191 (GAO protest of the award to UnitedHealth in the West region denied); 

UnitedHealth Military & Veterans Services, LLC, B-401652.8 et al., June 14, 2011, 2012 

CPD 83 (GAO protest of the award to Humana in the South region denied). After GAO 

denied UnitedHealth’s protest, the firm filed its protest with the U.S. Court of Federal 

Claims, which also denied it. See UnitedHealth Military & Veterans Services, LLC v. 

United States, Case No. 11–405C, 2011 U.S. Claims LEXIS 2128 (Fed. Cl. Oct. 25, 

2011). Because the U.S. Court of Federal Claims addressed the same broad protest 

issues and reached the same disposition as GAO, we used the GAO decision as the basis 

for our findings and did not separately discuss the subsequent U.S. Court of Federal 

Claims decision.

(See fig. 1.)

19In 2008, DOD instituted a policy that required that the acquisition process of certain 

service contracts be peer reviewed. TMA established a peer review policy applicable to all 

large service contracts with an aggregate estimated value of $6.5 million or more and 

where certain contracting decisions need to be made. For example, a pre-award peer

review is conducted when certain decisions, such as amendments to an RFP, are 

required. Similarly, post-award peer reviews of these types of contracts are conducted in 

instances where changes such as modifications to an awarded contract are needed.

20For the purposes of this report, we did not focus on the post-award phases of the 

acquisition process, which include the performance and monitoring of an awarded 

contract.

Federal Regulations 

and TMA Policy 

Defined the 

Acquisition Process 

for TRICARE’s Third 

Generation MCSCs

A Three-Phased Approach 

Was Used for TMA’s 

Contract Award Process 

for TRICARE’s Third 

Generation MCSCs
 

Page 8 GAO-14-195 TRICARE Managed Care Support Contracts

Figure 1: TMA’s Contract Award Process: Phases and Activities in the Acquisition Process

a

Market research is the collection and analysis of information about capabilities within the market to 

satisfy the agency’s needs.

Acquisition planning. According to a senior TRICARE acquisition 

official, staff in the former TMA Requirements Branch developed 

requirements for TRICARE’s third generation MCSCs during the 

acquisition planning phase.21 This senior official explained that the 

Requirements Branch was disbanded in 2009 because TMA leadership 

officials determined that the responsibility for developing requirements 

should be located within the program management office requiring the 

services and not TMA’s acquisition office.22

 

21Acquisition planning is the process by which the efforts of all personnel responsible for 

an acquisition are coordinated and integrated through a comprehensive plan for fulfilling 

the agency’s needs in a timely manner and at a reasonable cost. It includes developing 

the overall strategy for managing the acquisition. FAR § 2.101. Federal regulations 

generally require agencies to perform acquisition planning for all acquisitions. See FAR 

§ 7.102(a).

An official who participated in 

the third generation MCSCs’ acquisition process told us that the 

Requirements Branch reviewed the contract requirements of the second 

22According to DOD policy, a program management office is responsible for identifying the 

need for a product or service and then developing the contract requirements that 

represent the specific tasks, outcomes, and standards that must be achieved to meet the 

need and thus fulfill the contract requirements. DHA’s Policy and Benefits Branch, which 

manages the TRICARE Program, is the program management office responsible for 

developing requirements for future TRICARE MCSCs, according to a DHA program 

official.
 

Page 9 GAO-14-195 TRICARE Managed Care Support Contracts

generation MCSCs, as well as any modifications, as a starting point for 

developing the requirements for the third generation MCSCs.23

TRICARE acquisition officials developed one document that combined 

the acquisition strategy and plan for the third generation MCSCs.24 The 

document outlined a statement of need that identified why health care 

services were being acquired and the objectives to be achieved. The 

document also specified activities, such as market research, TMA would 

undertake prior to issuing an RFP.25 Market research was accomplished 

by publishing requests for information, which led to meetings between 

TMA and companies in the health care industry to collect information and 

feedback about the acquisition.26

Request for proposals. Following the acquisition planning phase, TMA 

issued an RFP. The RFP documented TMA’s requirements, including the 

contract type, significant contract dates, pricing arrangements, and the 

criteria to be used to assess offerors’ proposals. The RFP also 

TMA conducted further market research 

by sharing the draft RFP with companies in the industry to solicit 

feedback on the RFP, which included the proposed contract 

requirements. TMA also developed a source selection plan, which defined 

the evaluation factors and subfactors, and how much weight or 

importance should be assigned to each factor and subfactor when making 

a source selection. In addition, the plan identified the source selection 

team—key individuals participating in the evaluation and source selection 

process, as well as the procedures to be followed.

 

23According to DOD policy, officials should consider how the requirements were 

previously satisfied when developing new requirements.

24An acquisition strategy is a high-level description of the milestones in the acquisition 

process and how the milestones will be achieved. An acquisition plan documents the 

specific actions necessary to execute the approach outlined in the approved acquisition 

strategy.

25Market research is the collection and analysis of information about capabilities within the 

market to satisfy the agency’s needs. FAR § 2.101. According to a TRICARE acquisition 

official who participated in the third generation MCSC acquisition process, market 

research is an important component of planning for the acquisition because it ensures that 

the acquisition process is transparent and that potential offerors are aware of TMA’s 

intentions to acquire the products or services.

26Requests for information are publically released documents that allow the government to 

obtain feedback from industry on items such as the contract requirements.
 

Page 10 GAO-14-195 TRICARE Managed Care Support Contracts

documented information presented in both the acquisition and the source 

selection plans.

Award. Once proposals were received, the proposals were evaluated by 

the source selection team consisting of four primary entities: the teams 

that comprised the Source Selection Evaluation Board (Evaluation 

Board), the group that made up the Source Selection Advisory Council 

(Advisory Council), an individual serving as the Source Selection 

Authority (Selection Authority),27

 

27The Selection Authority for the third generation MCSCs was a person with technical 

knowledge and understanding of the Military Health System, including purchased care, as 

it related to the contract requirements for these MCSCs.

and an individual serving as the 

Procuring Contracting Officer (Contracting Officer). Each entity had 

specific tasks to complete during the award phase and performed these in 

a specific order. (See fig. 2.)
 

Page 11 GAO-14-195 TRICARE Managed Care Support Contracts

Figure 2: Source Selection Team Roles and Responsibilities for TRICARE’s Contract Award Process

a

The board is comprised of a technical evaluation team, a past performance evaluation team, and a 

price/cost evaluation team.

b

The Selection Authority for the third generation MCSCs was a person with technical knowledge and 

understanding of the Military Health System, including purchased care, as it related to the contract 

requirements for these MCSCs.

c

The source selection decision document is the single summary document supporting selection of the 

winning proposal consistent with the stated evaluation criteria.

TMA used a process established in the source selection plan to evaluate 

offerors’ proposals. To accomplish this, Evaluation Board teams reviewed 

offerors’ proposals against the three RFP evaluation factors and their 

relevant subfactors. The evaluation factors, in descending order of 

importance, were: (1) technical approach, (2) past performance, and 
 

Page 12 GAO-14-195 TRICARE Managed Care Support Contracts

(3) price/cost. These evaluation factors were developed to target critical 

aspects of the program for review and evaluation. The Evaluation Board 

evaluated each proposal against these factors. Ratings were assigned to 

each of the offerors’ proposals under the technical and past performance 

evaluation factors, and each offeror’s total proposal price was determined 

during the price/cost evaluation. The source selection team used a bestvalue tradeoff process to compare the relative merits of the offerors’ 

proposals under the various evaluation factors. The RFP provided that 

the technical approach and past performance factors, combined, were 

significantly more important than the price/cost factor, which allowed TMA 

to accept other than the lowest priced proposal in favor of a technically 

superior proposal in the best-value tradeoff decision.28

The technical approach factor was used to evaluate the offerors’ 

proposed approach—how the offeror intended to deliver services to fulfill 

contract requirements. Under this factor, the RFP identified seven 

evaluation subfactors, including network development and maintenance 

(which encompassed the consideration of network provider discounts),29

and claims processing.30

The past performance factor was used to evaluate an offeror’s ability to 

supply services based on a demonstrated record of performance. If an 

offeror did not have relevant past performance, the Evaluation Board’s 

past performance evaluation team was allowed to consider information 

from a predecessor company or parent organization. The subsequent 

ratings assigned to past performance considered each offeror’s 

demonstrated recent and relevant record of performance to predict the 

Each subfactor was assigned an individual 

rating and the subfactors were equally weighted during the evaluation. 

The technical evaluation team’s responsibility was to evaluate how well 

an offeror’s proposed approach met or exceeded TMA’s minimum 

requirements for each subfactor.

 

28Best value means the expected outcome of an acquisition that, in the government’s 

estimation, provides the greatest overall benefit in response to the requirements. FAR 

§ 2.101.

29Network provider discounts are obtained when a contractor negotiates discounted 

payment rates with network providers, thereby reducing health care costs.

30Claims processing includes requirements for verifying eligibility; determining benefit 

policy; correctly applying deductibles, cost-shares, copays, and referrals/authorizations; 

accurately coordinating benefits with other health insurances; and accurately reimbursing 

network and non-network claims. 

Technical Approach Factor

Past Performance Factor
 

Page 13 GAO-14-195 TRICARE Managed Care Support Contracts

offeror’s likelihood of success in meeting the current contract 

requirements.

The price/cost factor was used to evaluate whether the prices and costs 

in each offeror’s proposal were reasonable and realistic.31 In evaluating 

proposals under the RFP’s price/cost factor, the Evaluation Board was to 

arrive at a total evaluated price for each of the proposals and could also 

use the results of a price realism analyses in assessing performance 

risks.32

An official who participated in the third generation MCSC acquisition 

process told us that offerors were able to ask the Contracting Officer 

clarifying questions about the RFP and adjust their proposals based on 

those discussions. According to this official, after the Contracting Officer 

received the final proposal revisions, the Evaluation Board teams 

completed their evaluation and the Chair prepared the report. The

Selection Authority considered information provided in the Evaluation 

Board report, as well as the recommendations presented in the Advisory 

Council report, and then selected the offeror whose proposal represented 

the best-value to the government. The final source selection decisions 

represented the Selection Authority’s independent judgment, which in 

some instances deviated from the judgments made during the underlying 

evaluations. For example, in the 2009 award decision in the South region, 

the Selection Authority disagreed with the judgment of the Evaluation 

Board that the proposal of one offeror was more advantageous than the 

awardee’s proposal under one of the technical subfactors, finding instead 

that the two proposals were equally advantageous under that subfactor. 

After TMA announced the awards to the selected offerors, post-award bid 

protests were filed by unsuccessful offerors.

 

31The phrase “price/cost factor” reflects the fact that the RFP included both costreimbursement and fixed-price contract line items.

32A price realism analysis is the process of independently reviewing and evaluating 

specific elements of each offeror’s proposed price estimates to determine whether the 

estimated proposed price elements are realistic for the work to be performed, reflect a 

clear understanding of the work requirements, and are consistent with other parts of the 

proposal. Although price realism is not ordinarily considered in the evaluation of 

competitive fixed-price proposals, an RFP may provide for such an evaluation, as this one 

did, in order to measure the offeror’s understanding of the requirements and/or to assess 

the risk inherent in an offeror’s proposal.

Price/Cost Factor
 

Page 14 GAO-14-195 TRICARE Managed Care Support Contracts

Peer reviews of the acquisition process for certain contracts became TMA 

policy in September 2008 after the issuance of the RFP for TRICARE’s 

third generation MCSCs.33

According to a senior TRICARE acquisition official, post-award peer 

reviews are expected to be conducted before the exercise of each optionyear period for each MCSC. This official explained that two independent 

post-award peer reviews of TRICARE’s third generation MCSCs have 

been conducted. The first review conducted in March 2012 and the 

second in March 2013 found no significant issues or concerns regarding

the performance of any of the MCSC contractors. Subsequent post-award 

peer reviews of the third generation MCSCs will be conducted 

concurrently on an annual basis prior to the exercise of future option-year 

periods. Documentation from the peer reviews is to be included as part of 

the acquisition file for TRICARE’s third generation MCSCs.

Following bid protests in 2009, the Selection 

Authority requested that, as a best business practice, a peer review of the 

acquisition process for these contracts be conducted. The Deputy 

Director of Defense Procurement and Acquisition Policy documented in a 

memorandum the peer review team’s findings related to the acquisition 

process, identifying some of the same issues that were raised in the bid 

protests, such as the adequacy of discussions during TMA’s evaluation. 

The memorandum also included TMA’s responses to the peer review 

team’s concerns, citing whether TMA agreed or disagreed with each 

finding and why. If TMA agreed with a finding, it also identified how the 

issue would be addressed.

Bid protests were filed by unsuccessful offerors in all three TRICARE 

regions. Most of the bid protests raised issues related to TMA’s 

evaluation of offerors’ proposals under the three RFP evaluation factors: 

technical approach, past performance, and price/cost.

 

33The RFP for the third generation MCSCs was issued in March 2008.

Two Independent PostAward Peer Reviews Were 

Conducted of the 

Acquisition Process for 

TRICARE’s Third 

Generation MCSCs

Bid Protests of Third 

Generation MCSC 

Awards Were Filed in 

All TRICARE 

Regions; Proposal 

Evaluation Was a 

Common Theme
 

Page 15 GAO-14-195 TRICARE Managed Care Support Contracts

There were six bid protests from offerors across the three TRICARE 

regions.34 Four offerors filed five separate bid protests with GAO, and one 

offeror filed an agency-level protest with TMA. Out of the six bid protests 

filed across the three TRICARE regions, two protests were sustained by 

GAO, one protest was sustained by TMA, and the remaining three 

protests were denied by GAO.35 In response to decisions and 

recommendations made in the sustained bid protest decisions, TMA 

implemented corrective actions that resulted in new award decisions in 

each of the three TRICARE regions.36 The new award decisions 

withstood subsequent bid protest challenges, which were filed in two of 

the three TRICARE regions, the South and the West.

For TRICARE’s third generation MCSCs, the offerors that filed the six bid 

protests raised various issues and each protest varied in the number of 

issues raised. However, a common theme cited by all offerors was TMA’s 

evaluation of proposals under the three evaluation factors: technical 

approach, past performance, and price/cost. Of the three evaluation 

factors, offerors that filed bid protests most frequently challenged TMA’s 

evaluation of proposals under the technical approach factor and, in 

particular, the subfactor under which TMA evaluated network provider 

discounts. Network provider discounts may result in reduced health care 

costs, and TMA was to consider an offeror’s proposed network provider 

discounts, if any, during the evaluation of technical proposals under the 

network development and maintenance subfactor.

 

34After GAO denied the sixth bid protest included in our review, the unsuccessful offeror 

filed its protest with the U.S. Court of Federal Claims. We have not separately discussed 

this bid protest in our findings because the court addressed the same broad issues and 

reached the same decision as GAO.

35In considering protests challenging TMA’s evaluation of proposals, GAO and TMA did 

not reevaluate proposals; rather, the agencies examined the record to determine whether 

TMA’s evaluation conclusions were reasonable and consistent with the terms of the RFP 

and applicable procurement laws and regulations. GAO and TMA either sustained the 

protest if they determined that one or more of the alleged bid protest issues had merit or 

denied the protest after determining that the alleged protest issues lacked merit. Protests 

may contain both sustained and denied protest issues, as was the case with two of the 

sustained protests we reviewed. In these cases, GAO and TMA sustained the protests in 

part based on specific issues, while denying other protest issues.

36The types of corrective action an agency may take in response to a sustained bid 

protest vary depending on the facts of the case and can result in the same or a different 

offeror being awarded the contract.

Six Post-Award Bid 

Protests Were Filed 

across the Three 

TRICARE Regions, Three 

Were Sustained and Three 

Were Denied

Bid Protests for Each of 

the MCSC Awards in the 

Three TRICARE Regions 

Most Often Cited Issues 

with TMA’s Evaluation of 

Proposals
 

Page 16 GAO-14-195 TRICARE Managed Care Support Contracts

Offerors challenged TMA’s evaluation of network provider discounts in 

four protests, two of which were sustained and two of which were denied. 

In general, the issue concerned whether TMA properly evaluated offerors’ 

proposed network provider discounts in evaluating the relative merit of 

competing technical proposals under the network development and 

maintenance subfactor. Offerors that filed bid protests also raised issues 

related to TMA’s evaluation of proposals under the past performance and 

price/cost factors. For example, in one bid protest, the offeror that filed 

the protest claimed that TMA improperly evaluated the awardee’s past 

performance based on the past performance of its affiliated companies. 

Additionally, in the same protest, the offeror that filed the bid protest also 

alleged that TMA conducted a flawed price realism analysis in evaluating 

the awardee’s proposal under the price/cost factor. Offerors that filed bid 

protests sometimes raised issues that went beyond TMA’s evaluation of 

proposals under specific evaluation factors. Other issues raised by 

offerors that filed bid protests included improper business practices, unfair 

competitive advantage, conflict of interest, improper source selection, 

inadequate discussions to resolve proposal weaknesses, and TMA’s 

alleged failure to penalize offerors for not following RFP instructions 

regarding right of first refusal, page limits, and Medicare rate 

uncertainty.37 (See table 1.) Appendix I includes additional details on each 

of the six bid protests.

 

37Right of first refusal refers to the requirement that MCSCs give military treatment 

facilities the first chance to accept or refuse patient referrals, in order to accommodate the 

beneficiary within the military treatment facility or refer the beneficiary to a civilian 

provider. Medicare rate uncertainty refers to the relationship between TRICARE 

reimbursement rates and Medicare rates, which are uncertain and subject to change.
 

Page 17 GAO-14-195 TRICARE Managed Care Support Contracts

Table 1: Frequency and Types of Issues Raised in TRICARE’s Managed Care Support Contracts Bid Protests, by Region

TRICARE region

North South West

Issues raised in bid protest Protest 1 Protest 2 Protest 1 Protest 2 Protest 1 Protest 2

Total number of 

protests that 

raised each issue

Technicala √ √ X X X 5 

Past performanceb √ X X X 4 

Price/costc √ X X 3 

Otherd X √ X √ X 5 

Legend: √ = bid protest issues that were found to have merit and were sustained by GAO or TMA;

X = bid protest issues that were found not to have merit and were denied by GAO or TMA.

Source: GAO review of bid protest decisions.

Note: We have reported both the sustained and denied protest issues in tabulating our results in 

Table 1. In addition, we categorized protest issues at the level of evaluation factors rather than any 

subfactors.

a

Issues with the technical approach factor raised by the unsuccessful offerors included TMA not 

adequately accounting for network provider discounts.

b

Issues related to the past performance factor raised by the unsuccessful offerors included TMA 

improperly evaluating the awardee’s past performance based on the performance of its affiliated 

companies.

c

Issues with the price/cost evaluation factor raised by the unsuccessful offerors included challenges 

to TMA’s price realism analysis, such as TMA’s alleged use of outdated labor rate information in 

assessing the realism of an offeror’s proposed prices.

d

“Other” is a category that encompasses protest issues beyond the evaluation of an offeror’s proposal 

under one of the three RFP evaluation factors: technical approach, past performance, and price/cost. 

For example, other issues raised by unsuccessful offerors included: improper business practices; 

unfair competitive advantage; conflict of interest; improper source selection; inadequate discussions 

to resolve proposal weaknesses; and TMA’s failure to penalize offerors for not following the request 

for proposal instructions regarding items such as page limits.

TRICARE acquisition officials reported they have identified several areas 

where changes could be made to improve the acquisition process for 

future TRICARE MCSC acquisitions, including those scheduled to be 

awarded in 2018. According to TRICARE acquisition officials, preliminary 

lessons learned from the third generation acquisition process and 

resulting bid protests include (1) improvements in communication and 

documentation to increase transparency during the evaluation of the 

proposals and (2) increases to the length of the acquisition process to 

allow for additional time to evaluate proposals and for the transition from 

one MCSC to another.

TRICARE Acquisition 

Officials Identified and 

Applied Some 

Lessons Learned 

from the Third 

Generation MCSC 

Acquisition
 

Page 18 GAO-14-195 TRICARE Managed Care Support Contracts

For TRICARE’s third generation MCSCs, TRICARE acquisition officials 

told us the sustained bid protest decisions in all three TRICARE regions 

prompted them to take corrective actions and evaluate revised proposals.

According to TRICARE acquisition officials, among the issues they 

considered was whether TMA had clearly communicated to offerors 

through the RFP how it would evaluate the technical approach factor, 

specifically the subfactor related to network provider discounts, and 

whether TMA had adequately documented discussions during its 

evaluation of the proposals. In response to the sustained bid protests, 

TRICARE acquisition officials told us they were able to identify some 

preliminary lessons learned, which they implemented during their 

evaluation of revised proposals in the South and West regions.38

Communication: To more clearly communicate how TMA would evaluate 

proposals, TMA issued an amended RFP for the South and West regions 

and allowed offerors to submit proposal revisions. In the amended RFP, 

TMA added language to clarify how network provider discounts would be 

considered as part of the technical evaluation and the subsequent best 

value analysis.

TMA 

accomplished this in two ways.

Documentation: To address the need for adequate documentation of 

discussions during the evaluation process, TRICARE acquisition officials 

who participated in the MCSC evaluation process told us they improved 

their documentation during the reevaluation of proposals in the South and

West regions. Specifically, these officials said that they were more 

thorough in their evaluation of the revised proposals and more rigorous in 

documenting their discussions. Adequate documentation of discussions 

during the evaluation process ensured that the documentation accurately 

reflected the evaluation process that occurred and that all evaluations 

were conducted in accordance with the RFP.

Additionally, one of these officials told us that TMA had incorporated 

these preliminary lessons learned from the third generation MCSC 

acquisition process in subsequent acquisitions. For example, TMA 

incorporated these preliminary lessons learned into the RFPs for 

TRICARE’s three dental plans. Specifically, this official told us that in 

 

38In the South and West regions, TMA amended the original RFP, reissued the RFP to 

enable offerors to revise their proposals in certain areas, conducted discussions, and 

made another source selection and award.

TRICARE Acquisition 

Officials Learned That 

Better Communication and 

Documentation Are 

Needed During Proposal 

Evaluation
 

Page 19 GAO-14-195 TRICARE Managed Care Support Contracts

drafting the RFP for one of TRICARE’s dental plans—the TRICARE 

Dental Program—officials made sure to clearly define how TMA planned 

to assess the evaluation factors in the RFP to ensure that potential 

offerors understood the scope and magnitude of how the evaluation 

factors would be considered for awarding the contract.

TRICARE acquisition officials told us they also learned from the 

TRICARE third generation MCSC awards that more time may be required 

for the acquisition process. Specifically, officials said that additional time 

may be required to conduct proposal evaluations. In addition, officials 

said that the transition period may need to be longer to accommodate a 

change in contractors.

TRICARE acquisition officials who participated in the evaluation of 

TRICARE’s third generation MCSCs told us that TMA underestimated 

how much time was needed to evaluate proposals. Specifically, these 

officials told us that more time might be needed to conduct the evaluation 

of proposals under the technical approach factor because of the multiple 

evaluation subfactors that must also be considered. Out of the three 

evaluation factors—technical approach, past performance, and 

price/cost—the technical approach factor had the most subfactors. 

According to one TRICARE acquisition official, the number of technical 

subfactors made it more difficult to conduct the evaluation in the time 

allotted. This official suggested that for future MCSC acquisitions, DHA 

should consider whether all seven technical approach subfactors are 

necessary.39 Furthermore, the official stated that since some of these 

subfactors encompassed required administrative functions of the 

TRICARE Program and are laid out in its Operations Manual and other 

policy and guidance documents, offerors who are awarded the contract 

are expected to perform the required administrative functions.

 

39DHA will be responsible for making decisions for TRICARE’s fourth generation MCSC 

acquisition process.

TRICARE Acquisition 

Officials Believe More 

Time May Be Needed for 

the Acquisition Process

Additional Time to Conduct 

Proposal Evaluations
 

Page 20 GAO-14-195 TRICARE Managed Care Support Contracts

A senior TRICARE acquisition official told us that DHA is considering 

adding 2 or 3 months to the transition-in period for the fourth generation 

MCSCs to accommodate delays that may occur when responding to any 

bid protests that may be filed and transitioning from one contract to the 

next. This official explained that delays in initiating the contract 

performance periods for TRICARE’s third generation MCSCs could 

potentially increase costs if option periods are added to align the MCSCs’ 

end dates.40

Other factors can also add time to the transition from one generation of 

MCSCs to the next, according to TRICARE acquisition officials. For 

example, the start of the performance period for TRICARE’s third 

generation MCSC in the West region was delayed because a decision on 

the bid protest in that region could not be made until TMA made a new 

source selection decision in the South region following a sustained bid 

protest. In particular, the agency held UnitedHealth’s July 2009 West 

region protest in abeyance while TMA took corrective action following a

sustained bid protest in the South region, where UnitedHealth was also 

an offeror. Because the same offeror could not win contract awards in 

more than one region, UnitedHealth’s West region protest would have 

become moot if it received the South region award following TMA’s 

evaluation of the revised proposals. After TMA awarded the South region 

contract to Humana in February 2011, UnitedHealth’s agency-level 

protest in the West region was revived.

The official explained that this is because terms for these 

option periods would be negotiated in a non-competitive environment, 

which may affect the government’s ability to get the best value in terms of 

price and quality.

A senior TRICARE acquisition official also told us that transition delays 

may affect the beneficiaries who rely upon the services provided by the 

MCSC contractor. Specifically, the official said that more time may be 

required to transition from an incumbent contractor to a new contractor. A 

new contractor may need additional time to implement services for 

TRICARE beneficiaries, whereas the incumbent contractor essentially 

provides a continuation of services. For example, beneficiaries reported 

 

40As a result of the bid protest process and TMA’s implementation of corrective actions to 

address the issues in the sustained bid protests, the performance periods of the finalized 

MCSCs are no longer aligned. According to a TRICARE program official, the performance 

periods for the MCSCs are expected to end in 2015 in the North region, in 2017 in the 

South region, and in 2018 in the West region.

Additional Time to Allow for 

Transition from One MCSC to 

Another
 

Page 21 GAO-14-195 TRICARE Managed Care Support Contracts

problems with referral authorization as well as customer service when 

UnitedHealth assumed management of the TRICARE West region 

contract on April 1, 2013.41

Despite the implementation of lessons learned from TRICARE’s third 

generation acquisition process and the related bid protests, TRICARE 

acquisition officials told us that they cannot confirm which, if any, of these 

lessons will be incorporated into the acquisition process for TRICARE’s 

fourth generation MCSCs scheduled for 2018. However, these officials 

noted that the acquisition process for previous TRICARE MCSCs, 

including lessons learned from related bid protests, are generally 

considered when initiating the acquisition process for the next generation 

of TRICARE MCSCs. DHA began developing an acquisition plan for 

TRICARE’s fourth generation MCSCs during the first quarter of fiscal year 

2014, according to a TRICARE program official.

We requested comments from DOD, but none were provided.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Defense, and other interested parties. In 

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

 

41TRICARE beneficiaries in the West region cited concerns with access to specialty care. 

TMA responded to these concerns and issued a memorandum that allowed TRICARE 

Prime beneficiaries to receive recommended specialty care without first obtaining 

authorization from UnitedHealth and waived the usual penalty fees levied on those who 

see a specialist without prior approval. This emergency measure—that affected all 

medical care beginning April 1, 2013—went into effect in early May 2013 and was 

extended multiple times, through July 2, 2013.

Agency Comments
 

Page 22 GAO-14-195 TRICARE Managed Care Support Contracts

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or at draperd@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contribution to this 

report are listed in appendix II.

Debra A. Draper

Director, Health Care
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 23 GAO-14-195 TRICARE Managed Care Support Contracts

There were six bid protests filed by unsuccessful offerors across the three 

TRICARE regions. Out of the six bid protests filed across the three 

TRICARE regions, two protests were sustained by GAO, one protest was 

sustained by the TRICARE Management Activity (TMA), and the 

remaining three protests were denied by GAO.1 In response to decisions 

and recommendations made in the sustained bid protest decisions, TMA 

implemented corrective actions that resulted in new award decisions in 

each of the three TRICARE regions.2

This appendix provides summary information regarding the issues raised 

in the six bid protests. With respect to sustained bid protests, we describe 

only the issues sustained and not the issues denied, which did not form 

the basis for the ultimate decision in the case. In addition, we categorized 

protest issues at the level of evaluation factors, which were (1) technical 

approach, (2) past performance, and (3) price/cost. In some protests, 

unsuccessful offerors raised issues that went beyond the evaluation of 

proposals. We used the term “other” to encompass any protest issue that 

was not specific to the evaluation of a proposal under one of the three 

request for proposal (RFP) evaluation factors.

The new award decisions withstood 

subsequent bid protest challenges that were filed in two of the three 

TRICARE regions, the South and the West.

Health Net Federal Services (Health Net) filed two bid protests 

challenging the award to Aetna Government Health Plans (Aetna) in the 

North region in July 2009. GAO sustained one of the two protests and 

recommended that TMA reevaluate proposals and take other actions 

 

1

In considering protests challenging TMA’s evaluation of proposals, GAO and TMA did not 

reevaluate proposals; rather, the agencies examined the record to determine whether 

TMA’s evaluation conclusions were reasonable and consistent with the terms of the RFP 

and applicable procurement laws and regulations. GAO and TMA either sustained the 

protest if they determined that one or more of the alleged bid protest issues had merit and 

warranted corrective action, or denied the protest after determining that the alleged protest 

issues lacked merit. Protests may contain both sustained and denied protest issues, as 

was the case with two of the sustained protests we reviewed. In these cases, GAO and 

TMA sustained the protests in part based on specific issues, while denying other protest 

issues.

2

The types of corrective action an agency may take in response to a sustained bid protest 

vary depending on the facts of the case and can result in the same or a different offeror 

being awarded the contract.

Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

North Region Bid Protests
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 24 GAO-14-195 TRICARE Managed Care Support Contracts

consistent with the bid protest decision.3

Figure 3: Timeline of Bid Protest Events for TRICARE’s North Region Third Generation Managed Care Support Contract

TMA subsequently cancelled the 

award to Aetna based on GAO’s decision sustaining the protest and 

made an award to Health Net, the incumbent contractor, which is 

currently performing in the North region. (See fig. 3.)

a

Health Net’s second bid protest, filed in July 2009, raised different issues than its first bid protest, 

which was also filed in July 2009, but was denied.

b

In the sustained bid protest, GAO recommended that TMA reevaluate the proposals and take other 

actions consistent with the bid protest decision.

 

3

Health Net Federal Services, LLC, B-401652, Oct. 13, 2009, 2009 CPD 213 (GAO 

protest of the award to Aetna in the North region denied). Health Net Federal Services, 

LLC, B-401652.3, B-401652.5, Nov. 4, 2009, 2009 CPD 220 (GAO protest of the award to 

Aetna in the North region sustained).
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 25 GAO-14-195 TRICARE Managed Care Support Contracts

In the first bid protest, Health Net contended that TMA violated federal 

procurement law by improperly disclosing Health Net’s proprietary pricing 

information prior to the award of the contract, which, for purposes of this 

report, we have classified in the category of “other” protest issues that go 

beyond the evaluation of proposals.4

Other. Health Net alleged that TMA posted Health Net’s pricing and 

proposal information on a public website, and also provided the 

information to Congress without disclosing that the information was 

competitively sensitive. GAO recognized that serious errors had occurred, 

but determined that the Contracting Officer had reasonably concluded 

that the competition was not compromised, in part because the website 

disclosure did not occur until after final proposals were due. Therefore, 

Aetna—Health Net’s competitor—could not have used the information to 

its advantage.

GAO denied the bid protest as 

follows.

In the second protest, Health Net successfully challenged the award of 

the contract to Aetna on the basis of a number of issues including TMA’s 

evaluation of proposals and possible conflicts of interest. GAO sustained 

the bid protest based on the following reasons.

Technical approach. Health Net argued that TMA failed in its evaluation 

to adequately account for the network provider discounts associated with 

its existing TRICARE network. GAO agreed and sustained this protest 

issue because TMA had not properly accounted for the potentially 

significant cost savings to the government that would result from Health 

Net’s proposed network provider discounts.

Past performance. Health Net contended that TMA improperly assigned 

the highest past performance rating to Aetna’s proposal based on the 

past performance of its affiliated companies. GAO agreed and sustained 

this protest issue because TMA did not establish which of these affiliated 

companies were involved in the prior contracts or the roles, if any, that 

each of the affiliated companies would play in performing the TRICARE 

contract. In addition, GAO found that TMA failed to consider the fact that 

 

4

The procurement integrity provisions of the Office of Federal Procurement Policy Act 

prohibit certain activities by personnel involved in the procurement process, including 

disclosing procurement information before the award of the contract. See 41 U.S.C. 

§ 2102(a).

North Region Bid Protest One

North Region Bid Protest Two
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 26 GAO-14-195 TRICARE Managed Care Support Contracts

the contracts previously performed by the affiliates—evaluated as part of 

the past performance factor—were not comparable in size to the 

TRICARE managed care support contract (MCSC).

Price/cost. Health Net contended that TMA’s evaluation of Aetna’s 

proposal and subsequent price realism analysis were flawed. GAO 

agreed and sustained this protest issue because TMA did not reasonably 

evaluate whether Aetna’s staffing plan, as related to its price/cost 

proposal, reflected a lack of technical understanding or proposal risk. 

GAO also found that TMA had not reasonably considered whether 

Aetna’s proposal to hire a high percentage of incumbent staff at reduced 

wages was realistic.

Other. Health Net contended that Aetna gained an unfair competitive 

advantage in competing for TRICARE’s MCSC in the North region 

because Aetna had retained a former senior TMA official to assist with the 

preparation of its proposal. GAO found that the official had access to 

proprietary information related to Health Net’s performance of its 

incumbent contract and that this created at least the appearance of 

impropriety. GAO sustained the protest on the grounds that the 

Contracting Officer should have reviewed the matter, but did not do so 

because it was not brought to his attention.

There were two bid protests in the South region. The first protest was filed 

by Humana Military Healthcare Services (Humana) in July 2009 

challenging TMA’s award to UnitedHealth Military & Veterans Services 

(UnitedHealth). GAO sustained this protest and recommended that TMA 

reevaluate proposals consistent with its bid protest decision and make a 

new source selection decision. In implementing GAO’s recommendations, 

TMA issued an amended RFP and allowed offerors to submit revised 

proposals. TMA then reviewed the revised proposals and, based on this 

evaluation of revised proposals, awarded the contract to Humana, a 

different offeror than was initially awarded the contract. After TMA 

announced this award, a second protest was filed in the South region by 

UnitedHealth in March 2011. GAO denied this second protest.5

 

5

Humana Military Healthcare Services, B-401652.2 et al., Oct. 28, 2009, 2009 CPD 219 

(GAO protest of the award to UnitedHealth Military & Veterans Services in the South 

region sustained). UnitedHealth Military & Veterans Services, LLC, B-401652.8 et al., 

June 14, 2011, 2012 CPD 83 (GAO protest of the award to Humana in the South region 

denied).

South Region Bid Protests
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 27 GAO-14-195 TRICARE Managed Care Support Contracts

Humana—the incumbent contractor—is the current contractor for the 

South region. (See fig. 4.)

Figure 4: Timeline of Bid Protest Events for TRICARE’s South Region Third Generation Managed Care Support Contract

a

In the sustained bid protest, GAO recommended that TMA reevaluate proposals consistent with its 

decision and make a new source selection decision.

b

After GAO denied the bid protest, UnitedHealth filed its protest with the U.S. Court of Federal Claims. 

The Court of Federal Claims denied UnitedHealth’s bid protest and upheld the award to Humana.

In its protest, Humana contended that TMA failed in its evaluation to 

adequately account for the network provider discounts associated with its 

existing TRICARE network. GAO agreed and sustained the protest as 

follows.

Technical approach. Humana claimed that TMA, during its technical 

evaluation, did not adequately account for the potentially significant cost 

savings to the government that would result from Humana’s network 

South Region Bid Protest One
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 28 GAO-14-195 TRICARE Managed Care Support Contracts

provider discounts. GAO recommended that TMA reevaluate the 

proposals consistent with GAO’s decision and make a new source 

selection decision.

Following the sustained GAO decision in the Humana bid protest, TMA 

amended and reissued the RFP in the South region and provided the 

offerors an opportunity to revise their proposals, including providing more 

information about network provider discounts. After evaluating the revised 

proposals, TMA selected Humana for the contract award.

In its protest filed with GAO of TMA’s contract award to Humana, 

UnitedHealth raised a number of issues involving TMA’s technical 

evaluation of network provider discounts, as well as other issues related 

to its analysis of the price/cost evaluation factor and its failure to penalize 

offerors for not following RFP instructions. GAO determined that none of 

these issues had merit and denied the bid protest for the following 

reasons.6

Technical approach. UnitedHealth contended that TMA failed to 

consider the substantial risk related to Humana’s ability to achieve its 

proposed network provider discounts. GAO found that TMA reasonably 

evaluated Humana’s proposed network provider discounts and denied 

this aspect of UnitedHealth’s protest.

Price/cost. In challenging TMA’s price realism evaluation, UnitedHealth 

argued that TMA should have assigned a greater risk level to Humana’s 

revised proposal based on Humana’s plan to significantly reduce 

underwriting fees during the revision process.7

 

6

After GAO denied the bid protest, UnitedHealth filed its protest with the U.S. Court of 

Federal Claims. Because the court addressed the same broad protest issues and reached 

the same decision as GAO, we used the GAO decision as the basis for our findings and 

did not separately discuss the subsequent U.S. Court of Federal Claims decision in our 

discussion. See UnitedHealth Military & Veterans Services, LLC v. United States, Case 

No. 11–405C, 2011 U.S. Claims LEXIS 2128 (Fed. Cl. Oct. 25, 2011).

GAO found that TMA had 

reasonably assessed the risk associated with Humana’s revised 

7

Underwriting fees refer to the fixed-fee elements of an offeror’s price/cost proposal in the 

TRICARE acquisition. An offeror’s underwriting fees represent the potential for profit, or 

cushion against loss, in response to any cost fluctuations that might arise during contract 

performance, for example, if an offeror was unable to achieve its proposed network 

provider discounts. TMA evaluated proposed underwriting fees in assessing the realism, 

or performance risk, of an offeror’s price/cost proposal.

South Region Bid Protest Two
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 29 GAO-14-195 TRICARE Managed Care Support Contracts

underwriting fees and denied this issue. In addition, UnitedHealth argued 

that TMA failed to assign additional risk to Humana’s proposal based on 

the reduced staffing level of its claims processing subcontractor. GAO 

found that TMA adequately reviewed the subcontractor’s proposal and 

factored it into its overall assessment.

Other. UnitedHealth alleged that Humana failed to follow the RFP 

requirements regarding the following issues:

• Right of first refusal: UnitedHealth argued that Humana’s proposal 

deviated from the RFP requirement that military treatment facilities be 

given a right of first refusal to patient referrals and that TMA should 

have rejected the proposal or deemed it a significant weakness. GAO 

declined to consider UnitedHealth’s claim that Humana improperly 

deviated from these requirements because UnitedHealth had made a 

contradictory argument in the first South region bid protest.

• Page limits: UnitedHealth contended that Humana failed to adhere to 

a page limit on proposal revisions. GAO denied UnitedHealth’s 

argument, finding that Humana met the page limit in revisions to its 

technical proposal.

• Medicare rates: UnitedHealth alleged that Humana did not comply 

with an RFP requirement to acknowledge and discuss the linkage 

between TRICARE reimbursement rates and Medicare rates, which 

are uncertain and subject to change. In denying this issue, GAO 

rejected UnitedHealth’s interpretation of the RFP as requiring Humana 

to assume that Medicare rates would decline.

There were two bid protests in the West region. The first protest was an 

agency-level protest filed by UnitedHealth in July 2009 challenging the 

award to TriWest Healthcare Alliance Corporation (TriWest). This protest 

was sustained and included a recommendation that TMA reevaluate 

proposals and make a new source selection decision that was reasonable 

and consistent with the RFP. In implementing this recommendation, TMA 

issued an amended RFP and allowed offerors to submit revised 

proposals. TMA then reviewed the revised proposals and, based on this 

evaluation of revised proposals, awarded the contract to UnitedHealth, a 

different offeror than was initially awarded the contract. After TMA 

announced the new award, a second West region protest was filed by 

West Region Bid Protests
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 30 GAO-14-195 TRICARE Managed Care Support Contracts

TriWest in March 2012. GAO denied the second protest and UnitedHealth 

is the current contractor for the West region.8

Figure 5: Timeline of Events for TRICARE’s West Region Third Generation Managed Care Support Contract

(See fig. 5).

a

The agency held UnitedHealth’s July 2009 West region protest in abeyance while TMA took 

corrective action following a sustained bid protest in the South region, where UnitedHealth was also 

an offeror. Because the same offeror cannot win contract awards in more than one region, 

UnitedHealth’s West region protest would have become moot if it received the South region award 

following TMA’s evaluation of revised proposals. After TMA awarded the South region contract to 

Humana in February 2011, UnitedHealth’s agency-level protest in the West region was revived.

 

8

UnitedHealth Military & Veterans Services, April 6, 2011 (agency-level protest of the 

award to TriWest in the West region sustained). DOD does not publish agency-level 

protest decisions; however, GAO obtained a copy of the UnitedHealth Military & Veterans 

Services decision for purposes of our review. TriWest Healthcare Alliance Corporation, 

B-401652.12, B-401652.13, July 2, 2012, 2012 CPD 191 (GAO protest of the award to 

UnitedHealth in the West region denied).
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 31 GAO-14-195 TRICARE Managed Care Support Contracts

b

In the sustained agency-level bid protest, TMA’s Contracting Officer recommended that TMA 

reevaluate proposals and make a new source selection decision.

In the first West region bid protest, an agency-level protest filed with the 

Contracting Officer, UnitedHealth claimed that TMA did not conduct 

meaningful discussions that would have enabled UnitedHealth to correct 

a documented weakness in its technical proposal and that this weakness 

unreasonably tipped the source selection decision in favor of TriWest. For 

purposes of this report, we have classified this issue as “other” rather 

than a proposal evaluation issue, which TMA sustained as follows.

Other. UnitedHealth alleged that TMA failed to conduct meaningful 

discussions to alert UnitedHealth to a weakness assigned to its proposal 

under one of the technical approach evaluation subfactors involving 

claims processing. Under this subfactor, TMA had assessed a weakness 

in UnitedHealth’s plan for dealing with claims submitted by providers that 

were outside the West region. After reviewing the record of discussions 

between TMA and UnitedHealth during the contract evaluation process, 

TMA’s Contracting Officer determined that TMA had not conducted 

meaningful discussions in the area of claims processing. In addition to 

TMA’s failure to identify the proposal weakness through meaningful 

discussions, the Contracting Officer also found that the weakness was so 

minor it should not have been the tipping factor in selecting TriWest for 

the award. As a result, the Contracting Officer sustained the protest.

Following the sustained agency-level decision in the UnitedHealth bid 

protest, TMA issued a series of amendments to the RFP in the West 

region and allowed offerors to submit revised proposals. After evaluating 

the revised proposals, TMA selected UnitedHealth for the contract award.

After the award was made to UnitedHealth in the West region, TriWest—

the other remaining competitor—filed a protest with GAO. TriWest raised 

a number of issues involving TMA’s evaluation of proposals and source 

selection decision. GAO determined that none of these issues had merit 

and denied the bid protest for the following reasons.

Technical approach. TriWest contended that TMA did not give its 

proposal sufficient credit for its network provider discounts, and that the 

discounts offered by UnitedHealth were overstated. GAO found no basis 

to question TMA’s evaluation of either offerors’ network provider 

discounts.

West Region Bid Protest One

West Region Bid Protest Two
Appendix I: Description of Bid Protests of 

TRICARE’s Third Generation Managed Care 

Support Contract Awards

Page 32 GAO-14-195 TRICARE Managed Care Support Contracts

Past performance. TriWest challenged the past performance rating TMA 

assigned to UnitedHealth on several grounds, including the relevance of 

its past work and the scope of the past performance information TMA 

considered. TriWest also challenged its own past performance rating. 

GAO found no merit to these allegations.

Price/cost. TriWest asserted that TMA’s evaluation of UnitedHealth’s 

labor rates and subsequent price realism analysis was based on outdated 

information. GAO concluded that TMA conducted a proper price realism 

analysis of UnitedHealth’s proposal.

Other. TriWest argued that TMA’s Selection Authority gave undue weight 

to some of the evaluation subfactors, even though the RFP said that all 

subfactors would be weighted equally. GAO found, however, that the 

Selection Authority properly relied on those subfactors thought to be key 

discriminators in selecting UnitedHealth for the award.
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 33 GAO-14-195 TRICARE Managed Care Support Contracts

Debra A. Draper, (202)512-7114 or draperd@gao.gov

In addition to the contact name above, Marcia A. Mann, Assistant 

Director; Jacob L. Beier; Kathryn A. Black; Sarah C. Cornetto; 

Victoria C. Klepacz; Deitra H. Lee; Laurie L. Pachter; and 

William T. Woods made key contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(291094)
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